Proforma invoices

What a proforma invoice is for

A proforma invoice is a document sent before supply. It shows the goods or services, quantities, rates, taxes and total, much like a tax invoice, but it is not a tax invoice and does not create a GST liability by itself. Businesses use it to:

• request an advance payment before dispatch;
• help a buyer raise a purchase order or get internal approval;
• support a loan, subsidy or import process that needs a formal price document;
• confirm the final commercial terms before the sale.

Our guide on proforma invoice vs tax invoice explains the difference in detail, and the glossary entry on proforma invoice gives the short version. GST treatment of advances depends on the type of supply; see GST on advances received. This is general information, not tax advice.

How it works in Cashflow OS

Proforma invoices are part of the documents module, alongside quotations, purchase orders and delivery challans. They use the same items and parties as your Tally books, and the same branding you set once: logo, colours, letterhead, signature, and bank and UPI details. Share each one as a PDF on WhatsApp or by email, from the phone or the web app.

Because the bank and UPI details are printed on the document, a buyer can pay the advance straight from it, without calling you for account numbers.

A worked example: advance before dispatch

A solar equipment dealer receives an order from a school for inverters and batteries worth ₹3,40,000 before GST. The dealer's terms are 50% advance for institutional orders. He sends a proforma invoice:

The school's accounts office uses the proforma to approve payment and transfers the advance. When the advance is received, the dealer records the receipt in Tally (from the app, if writing is switched on), dispatches, and raises the tax invoice in the usual way. GST rates for each item should be checked on the GST portal; the example leaves them out deliberately.

Quotation, proforma, invoice: using each at the right time

Businesses often send the wrong document at the wrong stage, which confuses buyers and sometimes their accountants. A simple sequence works for most B2B sales:

1. Quotation while the buyer is still comparing and negotiating. It can change.
2. Proforma invoice once price and terms are agreed and you need an advance or the buyer needs a formal document for approval. It should match what the final bill will be.
3. Tax invoice in Tally when the goods or services are supplied. This is the document that counts for GST.
4. Delivery challan if goods move before or without an invoice, for example on approval or for job work.

Cashflow OS covers the first, second and fourth as branded documents, and the tax invoice stays in Tally. Keeping the stages distinct also helps when a buyer's auditor asks why there are two documents with similar amounts: one is clearly marked proforma, the other is the tax invoice, and their numbers come from different series.

Who uses it

• Dealers and distributors who supply institutions or new customers against advance.
• Manufacturers taking made-to-order work.
• Exporters and project suppliers whose buyers need a formal price document.
• Service businesses asking for part payment before starting a job.

Tips

• Label it clearly as a proforma invoice, so nobody mistakes it for a tax invoice.
• Number proformas in their own series, separate from tax invoices; see invoice numbering rules.
• State validity and the advance amount in the terms.
• Record advances in Tally against the party the day they arrive, so outstanding stays right.
• Use a quotation first if the price is still being negotiated; send the proforma once terms are agreed.

What it does not do

• A proforma invoice is a document, not an entry in Tally's books; it does not affect stock, accounts or GST returns.
• It does not collect payment; the buyer pays you directly using the bank or UPI details on it.
• It does not replace the tax invoice, which is raised in Tally when the supply is made.